A new Minnesota public adjuster fee case should make every ethical public adjuster uncomfortable. It should also make regulators take notice.
In Claims, Inc. v. Njitor, 1 the Minnesota Court of Appeals affirmed enforcement of a public adjusting contract requiring the policyholders to pay the public adjuster ten percent of insurance payments made under the coverages selected in the contract. The opinion is nonprecedential, but the economic implications of its reasoning deserve attention far beyond Minnesota.
The Njitors suffered a devastating house fire. Their dwelling limit was $647,432. Before they hired a public adjuster, Allstate had already inspected the loss and provided a written replacement cost estimate of $1,145,677.15. In other words, before the public adjuster contract was signed, Allstate’s own estimate showed that the dwelling loss exceeded the policy limit by nearly half a million dollars.
Twelve days after the fire, the Njitors signed a contract with Claims, Inc. The contract provided that Claims would assist with the “preparation, presentation, and adjusting” of the claim. Every coverage box was checked, and somebody wrote “all fire benefits” into the contract. In exchange, the policyholders agreed to pay Claims ten percent of amounts paid by Allstate relating to those coverages.
Think about that fee arrangement for a moment. Suppose an insurance company has already determined that a dwelling loss substantially exceeds a $647,432 policy limit. The policyholder then hires a public adjuster under a contract requiring payment of ten percent of all dwelling proceeds. Suppose the public adjuster does tremendous paperwork, attends meetings, answers questions, and ultimately persuades the insurer to pay exactly $1 more than the insurer otherwise would have paid.
Under the economic logic of this contract, that $1 improvement could generate a fee approaching $64,743 on the dwelling proceeds. The policyholder would gain an additional $1 and lose approximately $64,743.
That is not improving the policyholder’s financial position. The policyholder would have been roughly $64,742 better off never hiring the public adjuster. Something seems fundamentally wrong with that result.
To be fair, the court did not find that Claims did nothing. The opinion says Claims submitted four proofs of loss relating to various coverages and helped the Njitors find alternative living arrangements. This article is not suggesting otherwise.
The larger issue is the fee structure. A public adjuster can provide enormous value beyond simply increasing the dollar amount of a claim. A good public adjuster organizes the loss, documents damages, handles endless requests from the insurer, prepares estimates and inventories, preserves deadlines, understands coverage issues, and relieves an overwhelmed policyholder of a tremendous burden. There is real value in those services.
But if that is what the public adjuster is selling, the compensation arrangement should fairly reflect the value of those services. A percentage contingency fee has traditionally been justified by something different. The professional assumes the risk of nonpayment in exchange for receiving a percentage of the recovery achieved for the client. The economic interests of the professional and the client are supposed to travel in the same direction.
The problem arises when the percentage is applied to money that was already coming to the policyholder regardless of the public adjuster’s efforts. Then the incentives can become disconnected.
Imagine an insurer has already agreed that $1 million is owed. A public adjuster arrives afterward and signs a ten-percent contract covering the entire claim. The adjuster then obtains another $1. The insured has a gross recovery of $1,000,001. The public adjuster’s fee is $100,000.10. The public adjuster can declare that the claim was increased. The policyholder can accurately respond that hiring the public adjuster cost approximately $99,999 more than the adjuster added to the claim.
Who benefited from that transaction? That is the question insurance regulators should be asking.
The Njitors tried to make a version of this argument. They contended that Allstate had already determined the home was a total loss and promised to pay what was due before the public adjuster was hired. They further claimed the public adjuster represented that it would seek additional money for items such as solar panels and a remodeling loan and would charge a fee only on additional amounts recovered.
The Minnesota Court of Appeals essentially said the written contract controlled. The court found sufficient consideration because Claims promised to provide adjusting services in return for the Njitors’ promise to pay ten percent. Minnesota contract law would not inquire into whether that consideration was economically adequate. The court also rejected the attempt to use the alleged oral representations to change the unambiguous written agreement.
As a matter of traditional contract law, I understand the reasoning. As a matter of public adjuster regulation and consumer protection, I question the result.
Minnesota’s public adjuster statute says its purpose is to promote qualified adjusters dealing with the public “in the interest of a fair resolution of insurance claims.” Minnesota also requires public adjusters to disclose their fees in writing. But disclosure alone does not answer the harder question.
Should a public adjuster be permitted to charge a contingency percentage on insurance proceeds the adjuster did not cause the insurer to pay?
Florida has answered at least part of that question very differently. Florida law currently provides that, for covered residential claims subject to the statute, a public adjuster may receive zero percent of an insurance payment for a coverage part where the insurer’s payment or written agreement to pay occurred before the public adjusting contract was executed. Florida also limits compensation to one percent where the insurer promptly pays or commits to pay at least the applicable policy limit within the statutory period.
Florida’s statute becomes even more explicit with reopened and supplemental claims. Compensation must be based on claim payments obtained through the work of the public adjuster after the contract is entered into, and the adjuster cannot base the fee on previous settlements or previous claim payments.
Whatever one thinks about Florida’s increasingly complicated regulation of public adjusters, there is considerable common sense behind that principle. You should not receive a contingency fee on a contingency that occurred before you showed up.
I have represented policyholders for decades, and I strongly believe in the value of excellent public adjusters. I have seen great public adjusters transform claims. They find missed damages. They develop inventories nobody else could complete. They force insurers to confront overlooked coverage. They document claims professionally. They sometimes increase recoveries by hundreds of thousands or millions of dollars. Those public adjusters earn their fees.
Indeed, the best public adjusters should be among the loudest voices questioning fee arrangements that produce the opposite result. The reputation of the profession suffers when the public sees a public adjuster receiving a large percentage of insurance proceeds without a corresponding improvement in the policyholder’s financial position.
The proper question should never merely be, “How much did the insurance company pay after the public adjuster was hired?” The better questions are, “What would the insurance company have paid without the public adjuster? What additional value did the public adjuster create? And after paying the public adjuster’s fee, is the policyholder actually better off?”
If the answer to the last question is “no,” something is wrong with the bargain. Public adjusting should be about improving the policyholder’s position.
A contract may make that toll legally enforceable. That does not necessarily make it fair. Insurance regulators, public adjuster associations, and ethical public adjusters should think long and hard about the difference.
Thought For The Day
“Price is what you pay. Value is what you get.”
—Warren Buffett
1 Claims, Inc. v. Njitor, No. A26-0131, 2026 WL 2225008 (Minn. App. Aug. 3, 2026).
